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Advice To Europe: Deregulate And Cut The Red TapeSteven Rattner, a centrist, writes that Europe's problem is a suffocating regulatory environment

WASHINGTON – Well known Wall Street financier Steven Rattner stated the obvious about Europe’s lack of competitiveness and what to do about it in a NYT op-ed (Europe’s Anti-Business Stance, January 29, 2015). Europe’s problem, he says, is not about making the right choice between “stimulus” and “austerity”.

Not competitive Europe

The problem is that Europe is no longer competitive. The real problem is in stratified laws, ruled and customs that make it very difficult for enterprises to thrive. “Archaic restrictions on hiring and firing workers –writes Rattner– flawed energy policies and kilometers of red tape that can make even starting a business difficult –just to name a few– have combined to damage the Continent’s ability to compete in increasingly global markets”.

Centrist advice

So, there you have it. Red tape, rigid labor markets, and more. This is the problem. And, in case you are wondering, this is coming from a practitioner who worked for Barack Obama at the time of the General Motors bailout. In other words Rattner represents a centrist point of view, not some kind of far right, ultra free market extremism.

Yes, as he says, a stratification of bad policies, to which we should add the exaggerated power of trade unions, have created an anti-business and therefore anti-growth economic environment. This is the problem; and this is what needs to be addressed and resolved, if Europe wants to get out of this trend leading to economic decline.

QE is the wrong remedy

Given all this, continues Rattner, the recent European Central Bank (ECB) decision to start its own Quantitative Easing (QE) policy “amounts to reaching into a medicine cabinet when the patient needs open-heart surgery”.

Got that? The patient –Europe– needs the equivalent of open heart surgery, and instead the ECB is ladling more easy money, as if this were the appropriate cure for profoundly non-competitive economies.

Change policies

Indeed, what is the point of QE in Europe now? With real interest rate at zero across Europe, how much lower can they get? Europe’s problem is not that obtaining financing is too expensive, the problem is that there very few investments in activities that will create wealth and employment.

“Europe needs to become more competitive in global markets“, continues Rattner. “That can be achieved only by a variety of policy changes, such as keeping top tax rates at sensible levels and regulatory reforms that would give companies more freedom to manage their businesses as they see fit, including, when necessary, closing plants and reducing head counts”.

Unheard of

Can you believe that? Companies need freedom to operate, including the freedom to hire and fire employees. And taxes should be reasonable.

Unheard of.

And yet this almost banal advice comes from Steven Rattner, a centrist who used to work for the Obama administration, not exactly a nest of right-wing reactionaries.

However, the very fact that what Rattner, a reasonable practitioner, suggest has little chance of being enacted in France and Italy, let alone Greece shows the profound disconnect between what many Europeans believe to be sensible economic policies and what it takes in the real world to generate growth, wealth and jobs.

Socialism is alive and well

The sad conclusion is that, while the communist parties have lost their appeal in Europe, destructive socialist ideas are alive and well. To the extent that silly egalitarianism dominates, while profit-making activities are demonized, there is no way for Europe to come back.

For sure the ECB “medicine” is not going to solve deep-seated problems that are not even acknowledged by most policy-makers.